How Much Life Insurance Do You Need?

Cary Stamp, leading financial advisor based in Jupiter, FL, provides perspective on the proper amount of life insurance and the question of whether your beneficiaries would need to use the principal of life insurance proceeds for living expenses.




Hi, I’m Cary Stamp, and this is a Principled Wealth Moment.

I just read a statistic that talked about life insurance applications. And last week, in the midst of the health scare that we’re going through right now, insurance applications went up by 5% over the same period a year ago. I’m getting many questions, especially in light of the current crisis. How much life insurance should I have? How much do I need to protect my family? And I really think that it boils down to this. How do you want to be remembered? Because the amount of insurance that you leave, and the amount of assets that you leave will have a significant impact on your family when you’re not here.

Think about it this way. I talk to many of my peers who are 40 or 50 years old and we might have this conversation, and the subject of life insurance might come up. And they’ll say, I’m covered, I’m not worried about it, I have a million dollars, I have two million dollars of insurance on myself. My spouse will be fine. Plus, she can work, or he can work when I’m no longer here. So I look at it this way. I say to those people, okay, so you have two million dollars worth of life insurance, and if you’re not here, your family will get that benefit. But here’s how you should figure how much your family will have to live on, just taking the interest off of that two million dollars. Simply take the last four zeros off of the $2 million figure. In this case, that’s two hundred dollars. That’s pretty much how much your family would have to live on every day from your life insurance proceeds, if they don’t touch the principal. So could your family live on two hundred bucks? Is that how you want to be remembered, if you’re not here?

You have the opportunity for just a few hundred bucks a month, or even less, if you’re a younger person, to put your family in a position where they can thrive and not have to struggle if something happens to you. So put that in the back of your mind as we’re going through all of this. Consider what your options are, and if you need some additional coverage, call a financial adviser, call a certified financial planner, call our office if you’d like.

I’m Cary Stamp, and this has been a Principled Wealth Moment.

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